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Indonesian economy remains under stress as cases continue to climb
The economy is expected to pick up in the second quarter this year when more people are vaccinated and cases begin to plateau.
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A butcher checks his phone while waiting for buyers at West Tebet Market in South Jakarta on Tuesday. (JP/Seto Wardhana)
T
he Indonesian economy will remain under pressure this year and its recession is likely continue into the first quarter, economists have said, because of persistently rising COVID-19 cases, which have depressed economic activity and limited consumption.
The country’s gross domestic product (GDP) shrank 2.07 percent year-on-year (yoy) in 2020, the first annual contraction since the 1998 Asian financial crisis, Statistics Indonesia (BPS) announced on Friday. Nearly all components of GDP fell last year, with the exception of government spending, which grew as a result of COVID-19 stimulus packages.
The country’s GDP is expected to contract again in the first quarter, marking a prolonged recession, although the decline will likely be less severe than in the fourth quarter of last year, when the economy shrank by 2.19 percent yoy, said Piter Abdullah, an economist at the Center for Reform on Economics (CORE) Indonesia.
“In the second quarter, the vaccination [program] is expected to be implemented more widely, COVID-19 cases are expected to plateau and social and economic activities are expected to be relaxed further, so [the economy may] start to pick up,” Piter told The Jakarta Post last Friday.
However, such an economic recovery timeline is only possible if the government refrains from tightening mobility restrictions again, Piter said.
Indonesia entered its first recession in two decades last year, as the economy contracted by 5.32 percent in the second quarter and by 3.49 percent in the third.
